Turkey elected a strongman. He used the state to buttress his own power. That made necessary, but politically-difficult decisions (like raising interest rates), impossible.
> Turkey has external debt but so on the US
Few Americans borrow in non-U.S. dollars. And the U.S. government only borrows in U.S. dollars. This works because the dollar works. Investors and exporters trust it to retain value.
The lira, on the other hand, isn't trusted. So when the Turkish government wants to borrow money, investors aren't willing to accept being paid back in lira. (And the government, in any case, needs hard currency to pay for imports. Because the people selling Turkey imports don't want to be paid in lira, either.)
This is interesting. But, the world is not all about US. My question is, can Trump do same with some European country?
But yes, the US is in a very strong position vis a vis almost every other nation in the world. Trade wars in general are not good economic policy, but the truth is that they will generally hurt the counter-party more than they hurt the US .
Trump didn’t cause Turkey’s problems. Decades of debt-driven growth, an imbalanced reliance on exports and incompetent administration (in defending property rights and monetary policy) caused this. Investors aren’t dumping Turkish assets because the U.S. levied light sanctions. They’re selling because Erdogan installed an incompetent son-in-law as central banker.
Erdogan travels a well-worn path. Most dictators don’t leave office peacefully. They die horribly or die in power. Their nation’s economies therefore transform into a mechanism for preserving their power. Longer-term and broader concerns, in turn, atrophy.
Initially. Now he’s making his own. The present policy of printing money to buy currency with which to pay debts is unsustainable. Putting family and cronies in positions that are meant to be independent makes people sell.
Why did not previous Presidents think of it and opted for traditional war? This trade war is more safer for Americans.
>why didn't previous presidents think of it
They probably did, but were likely smart enough to figure out that a trade war with the world will trigger a backlash that the US won't be able to handle. The world will seek an alternative to the US dollar, and I think it will happen very soon if Trump continues doing what he does.
US Chamber of Commerce after Turkey imposition of the tariff on US goods.
https://www.cnbc.com/video/2018/07/03/us-chamber-of-commerce...